公司簡介 Corporate Profile 華潤集團於中國的城市燃氣分銷旗艦 華潤燃氣控股有限公司 ( 華潤燃氣 ) 主要由中國最大的國有企業集團之一的華潤 ( 集團 ) 有限公司擁有 作為中國領先的燃氣公用事業集團, 華潤燃氣主要從事下游城市燃氣分銷業務, 包括管道天然氣分銷及天然氣加氣站業務及

Transcription

1 Bench-marking for Efficiency 學標杆增效益 年2015 報Annual Report

2 公司簡介 Corporate Profile 華潤集團於中國的城市燃氣分銷旗艦 華潤燃氣控股有限公司 ( 華潤燃氣 ) 主要由中國最大的國有企業集團之一的華潤 ( 集團 ) 有限公司擁有 作為中國領先的燃氣公用事業集團, 華潤燃氣主要從事下游城市燃氣分銷業務, 包括管道天然氣分銷及天然氣加氣站業務及燃氣器具銷售 華潤燃氣的業務策略性地分佈於全國各地, 主要位於經濟較發達和人口密集的地區以及天然氣儲量豐富的地區 憑藉良好的行業基礎及本集團的執行能力, 華潤燃氣於二零一五年繼續通過內涵式增長及收購實現快速擴張 於二零一五年末, 華潤燃氣的城市燃氣項目總共達 220 個, 分佈於中國 22 個省份, 其中包括 14 個省會城巿及三個直轄市, 年燃氣總銷量達約 149 億立方米及客戶數達 2,361 萬戶 能源結構優化和環境污染治理將推動中國天然氣消費持續增長, 中國政府近年來採取多項措施提倡對污染較少的能源資源的發展及使用 同煤炭及原油等傳統能源資源相比, 天然氣產業符合國家創新 協調 綠色 開放 共享的核心發展理念 因此, 中國政府十分支持天然氣行業發展, 致力於二零二零年達到使天然氣佔全國能源消耗總量的比例由目前的 6% 增至 10% 或以上的國家發展目標 中國仍是全球天然氣發展最重要區域, 中國天然氣市仍處於重要發展期, 華潤燃氣將會充分利用有利經營環境, 透過內涵及外延式增長持續擴張 在追求卓越表現的同時努力提升其經營效率 提供安全可靠的清潔能源供應並向客戶提供體貼 周到及高效的服務, 向股東提供不斷增長且可持續的業績表現, 為僱員創造廣泛且專業的個人發展機會, 為中國及世界的環境保護及改善做出貢獻, 成為中國燃氣行業最受尊敬的領導者 THE PRC CITY GAS DISTRIBUTION FLAGSHIP OF CHINA RESOURCES GROUP China Resources Gas Group Limited ( CR Gas ), substantially owned by China Resources (Holdings) Company Limited, one of the largest state-owned conglomerates in China, is a leading gas utilities group in China, which is principally engaged in downstream city gas distribution business including piped natural gas distribution, natural gas filling stations operation and sales of gas appliances. Its operations are strategically located in areas of China, which are economically more developed and densely populated and areas with rich reserves of natural gas. Leveraging on the excellent industry fundamentals and the Group s execution competency, CR Gas continues to expand rapidly in 2015 via organic and acquisition growths. At the end of 2015, CR Gas s portfolio is consisted of 220 city gas projects in 22 provinces of China including 14 provincial capitals and 3 direct administrative municipalities with an annual gross gas sales volume of some 14.9 billion cubic meters and million customers. As optimization of energy structure and environmental pollution control will promote the sustainable growth of natural gas consumption in China, the PRC government has, in recent years, taken various measures to promote the development and utilization of less polluting energy sources. The natural gas industry accords with the core development idea of innovation, harmony, green, open and sharing as compared with conventional energy resources such as coal and crude oil. The PRC government has therefore been very supportive of the development of the natural gas industry in order to meet its stated goal of natural gas making 10% or more of the total Chinese energy sources by 2020, up from the current 6% level. The natural gas market in China is still in the important development period, as China remains the most important region in the global rise of natural gas development. CR Gas is well placed to take advantage of such a favorable operating environment and to become the most respectable leader in the PRC s gas industry by continuously expanding through organic and external growths; diligently enhancing its operational efficiency in pursue of excellence; delivering a safe and reliable supply of clean energy as well as the caring, competent and efficient service to our customers; offering growing and sustainable performance to shareholders; creating extensive professional and personal development opportunities to employees; and contributing to the protection and improvement of the Chinese and global environment.

3 華潤燃氣事業版圖 Pan-China Footprint of CR Gas 220 華潤燃氣之燃氣項目 CR Gas City Gas Projects 3 22 省份 Provinces 直轄市 重慶 上海 天津 Municipalities (Chongqing, Shanghai, Tianjin) 14 省會城市 Provincial Capitals 72 地級市 Prefecture-level Cities 2015年新增項目 2015 New projects 開建日期 (Commissioning Year) 建成日期 (Completion Date) 運氣能力 (Capacity) 運營商 (Operator) 1.西氣東輸一期 West to East Bn m3 中石油 (Petrochina) 2.西氣東輸二期 West to East Bn m3 中石油 (Petrochina) 3.西氣東輸三期 West to East Bn m 中石油 (Petrochina) 4.川氣東送 Sichuan to East Bn m3 中石化 (Sinopec) 5.中緬油氣 Myanmar to China Bn m 3 中石油 (Petrochina) 6.俄羅斯天然氣東線 Russia to China Eastern Pipeline Bn m3 中石油 (Petrochina) 7.俄羅斯天然氣西線 Russia to China Western Pipeline 不詳 Unknown 不詳 Unknown 30Bn m3 中石油 (Petrochina) 管道名(Pipeline Name) 3 現有液化天然氣接收站 Existing LNG Receiving Terminal 正在建設中液化天然氣接收站 LNG Receiving Terminal under construction 正在計劃中液化天然氣接收站 LNG Receiving Terminal under planning 安徽大區 Anhui Regional Centre 安徽 Anhui 淮北 Huaibei 阜陽 Fuyang 旌德 Jingde 靈璧 Lingbi 金寨 Jinzhai 合肥車船用氣 Hefei VG 宿州 Suzhou 石台 Shitai 東至 Dongzhi 霍山 Huoshan 福建大區 Fujian Regional Centre 福建 Fujian 1 福州 Fuzhou 廈門 Xiamen 平潭 Pingtan 建陽 Jianyang 龍岩 Longyan 江門 Jiangmen 開平 Kaiping 河源 Heyuan 龍川 Longchuan 陽江 Yangjiang 潮安 Chaoan 高州 Gaozhou 汕頭 Shantou 龍門 Longmen 陽江高新區 Yangjiang Hi-Tech Zone 遂溪 Suixi 英德 Yingde 陸豐 Lufeng 徐聞 Xuwen 雲安 Yunan 興寧 Xingning 佛岡 Fogang 東源 Dongyuan 鶴山 Heshan 廣西 Guangxi 2 南寧車船用氣 Nanning VG 柳東新區 Liuzhou Eastern New Zone 賀州工業園區 Hezhou Industrial Park 欽州 Qinzhou 梧州 Wuzhou 廣東大區 Guangdong Regional Centre 黑吉大區 Heiji Regional Centre 廣東 Guangdong 新會 Xinhui 中山 Zhongshan 大亞灣 Dayawan 德慶 Deqing 和平 Heping 吉林 通化 集安 遼源 Jilin Tonghua Jian Liaoyuan 3 長春液化氣 Changchun LNG 吉林永吉 Jilin Yongji 松原 Songyuan 白城 Baicheng 琿春邊境經濟合作區 Hunchun Development Zone 黑龍江 Heilongjiang 4 哈爾濱開發區 Harbin Development Zone 伊春 Yichun 尚志 Shangzhi 延吉 Yanji 黑河 Heihe 河南大區 Henan Regional Centre 河南 Henan 5 鄭州 Zhengzhou 安陽 Anyang 鎮平 Zhenping 濮陽 Puyang 方城 Fangcheng 駐馬店 Zhumadian 通許 Tongxu 洛寧 Luoning 夏邑 Xiayi 南召 Nanzhao 鄧州 Dengzhou 睢縣 Sui County 湖北大區 Hubei Regional Centre 江蘇大區 Jiangsu Regional Centre 湖北 Hubei 6 武漢 Wuhan 棗陽 Zaoyang 襄樊 Xiangfan 宜城 Yicheng 潛江 Qianjiang 谷城 Gucheng 紅安 Hongan 武漢化工園 Wuhan Chemical Park 南漳 Nanzhang 鐘祥 Zhongxiang 京山 Jingshan 沙洋 Shayang 武漢武鋼 Wuhan Wugang 江陵 Jiangling 咸寧 Xianning 江蘇 Jiangsu 8 南京江寧 Nanjing Jiangning 南京車用氣 Nanjing VG 無錫 Wuxi 蘇州高新技術區 Suzhou Hi-Tech Zone 通州 Tongzhou 鎮江 Zhenjiang 昆山 Kunshan 啟東 Qidong 海門 Haimen 宿遷 Suqian 沭陽 Shuyang 姜堰 Jiangyan 大豐 Dafeng 常州車用氣 Changzhou VG 淮安 Huaian 湖南大區 Hunan Regional Centre 江西大區 Jiangxi Regional Centre 湖南 Hunan 岳陽 Yueyang 7 長沙 Changsha 郴州 Chenzhou 資興 Zixing 婁底 Loudi 湘西 Xiangxi 冷水江 Lengshuijiang 祁陽 Qiyang 漣源 Lianyuan 雙峰 Shuangfeng 寧遠 Ningyuan 江西 Jiangxi 9 南昌 Nanchang 鷹潭 Yingtan 景德鎮 Jingdezhen 貴溪 Guixi 萬年 Wannian 撫州 Fuzhou 吉安市 Jian City 吉安縣 Jian County 景德鎮車用氣 Jingdezhen VG 永豐 Yongfeng

4 TIANJIN天津 SHANGHAI 上海 重慶 河北大區 Hebei Regional Centre 包頭車用氣 Baotou VG 慈溪 Cixi 三門 Sanmen 杭州通能 Hangzhou Tongneng 山東大區 河北 Hebei Shandong Regional Centre 杭州綠能 Hangzhou Lvneng 衡水 Hengshui 台州 Taizhou 山東 Shandong 滄州 Cangzhou 奉化 Fenghua 10 邯鄲 Handan 濟南 Jinan 武義 Wuyi 遷安 Qianan 魚台 Yutai 麗水 Lishui 棗強 Zaoqiang 兗州 Yanzhou 樂清 Yueqing 唐山高新技術產業園區 淄博 Zibo 仙居 Xianju Tangshan Hi-Tech Zone 濟寧 Jining 寧海 Ninghai 秦皇島 Qinhuangdao 12 杭州車船用氣 Hangzhou VG 滕州 Tengzhou 臨沂 Linyi 台州東部新區 遼寧大區 安丘 Anqiu Taizhou Eastern New Zone Liaoning Regional Centre 濰坊高新技術區 Weifang Hi-Tech Zone 長興 Changxing 濰坊 Weifang 磐安 Panan 遼寧 Liaoning 棗莊 Zaozhuang 象山 Xiangshan 鳳城 Fengcheng 東營 Dongying 本溪 Benxi 萊州 Laizhou 工程 設計公司 岫岩 Xiuyan 禹城 Yucheng Construction and Design Company 高升經濟區 Gaosheng Economic Area 廣饒 Guangrao 桓仁 Huanren 齊河開發區 Qihe Development Zone 成都工程 Chengdu Construction 南芬 Nanfen 成都設計 Chengdu Design 棗莊車用氣 Zaozhuang VG 丹東 Dandong 鄭州工程 Zhengzhou Construction 章丘 Zhangqiu 花園口 Huayuankou 鄭州設計 Zhengzhou Design 大連保稅區 Dalian Free Trade Zone 上海大區 南京工程 Nanjing Construction 海城 Haicheng Shanghai Regional Centre 南京設計 Nanjing Design 盤錦 Panjin 上海 Shanghai 遼陽 Liaoyang 山西大區 11 寶山 Baoshan 錦州 Jinzhou Shanxi Regional Centre 營口 Yingkou 山西 Shanxi 營口開發區 Yingkou Development Zone 浙江 Zhejiang 洪洞 Hongdong 富陽 Fuyang 內蒙古 Inner Mongolia 霍州 Huozhou 臨海 Linhai 赤峰 Chifeng 陽曲 Yangqu 杭州灣 Hangzhouwan 大同 Datong 陽泉 Yangquan 長治 Changzhi 山西車用氣 Shanxi VG 婁煩 Loufan 陝西 Shaanxi 14 西安臨潼 Xi an Lintong 雲貴大區 Yungui Regional Centre 雲南 Yunnan 四川大區 Sichuan Regional Centre 15 昆明 Kunming 四川 Sichuan 13 成都 Chengdu 瀘州 Luzhou 宜賓 Yibin 內江 Neijiang 隆昌 Longchang 資中 Zizhong 遂寧 Suining 什邡 Shifang 攀枝花 Panzhihua 通江 Tongjiang 達州 Dazhou 彭州 Pengzhou 渠縣 Qu County 大竹 Dazhu 開江 Kaijiang 西北大區 Xibei Regional Centre 青海 Qinghai 格爾木 Golmud 湟中 Huangzhong 樂都 Ledu 昆明車用氣 Kunming VG 東川 Dongchuan 雲南車用氣 Yunnan VG 楚雄 Chuxiong 雲南管輸 Yunnan Pipeline 昆明高新區 Kunming Hi-Tech Zone 貴州 Guizhou 清鎮開發區 Qingzhen Development Zone 清鎮 Qingzhen 16 重慶 Chongqing 17 天津 Tianjin

5 Contents 2 Chairman s Statement 14 Report from the Chief Executive Officer 23 Financial & Operational Highlights 26 Management Discussion and Analysis 31 Biographical Details of Directors and Senior Management 40 Corporate Governance Report 54 Directors Report 73 Independent Auditor s Report 75 Consolidated Statement of Profit or Loss and Other Comprehensive Income 76 Consolidated Statement of Financial Position 78 Consolidated Statement of Changes in Equity 80 Consolidated Statement of Cash Flows Financial Summary 204 Corporate Information

6 Chairman s Statement The Group will continue to expand steadily via sustainable organic growth and quality external acquisitions. 7.4%6.9% 5.7% 5.6% Overall RESULTS The downstream city gas industry in China experienced a challenging year during 2015 with gas demand softening due to the deceleration of the Chinese economic growth and the significant drop in price of oil and related products which reduced the price competitiveness of gas. This is aggravated by the slow down in industrial activity and hence demand for gas by industrial users, as reflected by the relatively weak Chinese economy which registered a lower 6.9% GDP growth rate compared to 7.4% in The overall 2015 gas volume demand growth in China was only 5.7%, same level as the 5.6% registered in CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

7 Chairman s Statement 9% 14% 8% ,361 Despite these challenging environment, the Group s gross gas sales volume increased by 9% and connected residential customers increased by 14%. Turnover for 2015 increased by 8% to HK$31,096 million and profit attributable to the Company s equity holders increased 14% to HK$2,838 million. The Group s city gas distribution business in China continued to contribute significant profit and cash inflow to the Group. The Group has become the largest city gas distributors in the PRC with gross annual gas sales volume of 14.9 billion cubic meters and million customers. FAVOURABLE downstream NATURAL GAS INDUSTRY FUNDAMENTALS IN THE PRC The on-going economic growth and urbanisation in China have continued to increase the demand for energy in China. In order to diversify energy base and reduce reliance on more polluting energy sources such as coal and crude oil, the PRC government has, in recent years, taken concrete measures to promote the development and utilisation of less polluting energy sources. Natural gas is considered an effective and cleaner substitute for conventional energy sources such as coal and crude oil. The PRC government has therefore been very supportive of the development of the natural gas industry in China. (BP) 6%23.7% The percentage of natural gas in total energy consumption in the PRC is very low compared to international levels. According to BP Statistical Review of World Energy June 2015, for 2014, natural gas only accounted for 6% of China s total primary energy consumption, which is far lower than the international average of 23.7%. To increase natural gas supply, the West to East Gas Transmission pipelines were constructed with the support of the PRC government to bring natural gas from the Xinjiang Autonomous Region to the coastal regions of the PRC. Construction of the second and third phases of the West to East Gas Transmission pipelines from Central Asia and the Sichuan to East pipelines from the gas rich Sichuan Province to coastal regions as well as the Myanmar to Yunnan gas pipeline have been completed. Construction of the West to East Gas Transmission Phase 4, Russia to North-East China gas pipeline as well as Liquefied Natural Gas terminals in coastal cities of the PRC are actively in progress. Natural gas price reform to close the price gap between imported and local gas prices and eventually to reach market driven level are also being implemented. Once realised, these measures are expected to significantly increase the supply of natural gas and its demand in China in the foreseeable future. 3

8 Chairman s Statement 5.6%10% The National Development and Reform Committee ( NDRC ) has announced that gas will account for 10% or more of the energy sources in China by 2020, up from the current 5.6% level. Despite the challenging environment in 2015 as noted above, the Group is confident that the PRC Government s long-term strategic vision of heavily promoting the use of natural gas to diversify its energy sources and combat pollution remains unchanged. All relevant policies and measures will be constantly finetuned by NDRC to achieve this goal. This will continue to boost the demand and availability of natural gas in China and will continue to offer significant opportunity for future growth in the downstream gas industry in China % On 28th February, 2015, NDRC announced that with effect from 1st April, 2015, the ceiling city gate gas price of non-residential users for existing volume will increase by RMB0.04/m 3 and that for incremental volume will reduce by RMB0.44/m 3. This effectively merges the gas prices of existing and incremental gas volumes resulting in an overall net reduction in blended price of city gate gas. On 19th November 2015, NDRC announced that with effect from 20th November, 2015, the ceiling city gate gas price for non-residential users is reduced by RMB0.70/m 3. These unprecedented two times reduction of city gate price within a year since gas price reform started in 2011, signals the unwavering objective of NDRC to support the development of Chinese gas industry to ultimately achieve market based gas price for the PRC. These measures to enhance the price competitiveness of gas will ensure that the NDRC s target of gas comprising about 10% or more of the total energy sources in China by 2020 is achievable. With the coming availability of abundant cheaper gas globally and in China within the next 3 to 5 years, such market driven approach of gas pricing will spike the continue demand for gas and will be extremely positive for the entire downstream city gas industry. The above factors augur well for the natural gas industry in China and offer significant opportunity for the continuous growth of the Group in the foreseeable future. 4 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

9 Chairman s Statement Sustainable Growth of natural Gas Strong Commitment to Cleaner energy BCm as of Total energy Consumption 二零零零年至二零一五年複合年增長率 CAGR 消耗量 Consumption: 14.6% 生產 Production: 11.3% % 5.6% 10.0% 80% 60% 10.9% 17.5% 15.0% 13.0% 40% 66.0% 62.0% 20% % 天然氣消耗量 Natural Gas Consumption 天然氣生產 Natural Gas Production 燃氣 Gas 原油及其他 Oil & Others 非化石燃料 Non-fossil fuel 煤炭 Coal BP Source: 2015 (NDRC); (BP Statistical Review of World Energy June 2015) BP Source: 2020 (NDRC); 2014 (BP Statistical Review of World Energy June 2015) Sustainable Growth of natural Gas natural Gas Share of Total Primary energy Consumption 70% 60% 50% 40% 30% 61% 54% 世界平均 World Average 23.7% 20% 10% 0% 伊朗 Iran 俄羅斯 Russia 34% 意大利 Italy 32% 英國 UK 30% 美國 USA 28% 加拿大 Canada 22% 日本 Japan 21% 德國 Germany 8% 香港 HK 6% 中國 China BP Source: BP Statistical Review of World Energy June

10 Chairman s Statement Sustainable EXPANSION AND GROWTH OF BUSINESS During 2008, the Company acquired a portfolio of 7 city gas distribution projects from China Resources (Holdings) Company Limited. The acquisition allows the Company to enter into the fast growing city gas distribution business in China and provided the Group with a sound foundation to tap into the burgeoning city gas distribution business in the PRC by capturing the rapid increase in demand for natural gas in China and leveraging China Resources Group s strong presence and brand name in China. 198 From 2009 to 2014, the Group acquired another 198 city gas projects. These projects are mainly located in regions where there are rich natural gas reserves and the economically more developed Eastern Board as well as densely populated provincial capitals and emerging cities of China. The Group also focuses on developing gas distribution projects in areas where there are existing or potential piped natural gas supply. During 2015, the city gas projects acquired from 2008 to 2014 continue to grow organically in line with the growth in natural gas supply in China During 2015, the Company continued to make new acquisitions from the market and acquired 18 city gas projects. As at 31st December, 2015, CR Gas portfolio included 220 city gas projects and its footprint covered 22 Chinese provinces and included 3 direct administrative municipalities, 14 provincial capitals and 72 prefecture level cities. 49% 1, CNG 1 LNG1,357 On 8th March, 2015, CR Gas has signed a Framework Agreement for a proposed 49% city gas joint venture in Qinhuangdao with Qinhuangdao Government. Qinhuangdao is a coastal city in Hebei Province with an annual GDP of RMB125 billion and annual gas consumption of 230 million m 3. The existing gas concession area covers Harbour Zone, Beidaihe Zone, Shanhaiguan Zone, New Development Zone and Beidaihe New Zone, with more than 390,000 connected households, 6 gas stations (5 CNGs and 1 LNG) and 1,357km pipeline. This joint venture was subsequently set up in October % 9,400 70%3.8 8 On 9 March, 2015, CR Gas announced that it will invest RMB612.5 million to set up a 49% joint venture with Qingdao Energy Group. Qingdao is one of the most economically developed cities in China with annual GDP exceeding RMB940 billion with vast demand for piped natural gas in the foreseeable future. The current market share of Qingdao Energy Group is over 70% and the gas sale volume is some 380 million m 3. The volume is expected to double to some 800 million m 3 by CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

11 Chairman s Statement number of Projects ( ) Gas Sales Volume (Million m 3 ) 14,000 12,000 10,000 二零零八年至二零一五年複合年增長率 : 45% CAGR: 45% 9,268 12,091 13,323 14,913 8,000 6,000 5,577 7,215 4,000 2,000 1,371 2, As one of the biggest remaining projects in China, this project will bring immediate profit contribution in 2016 and eventually become one of our top projects by sales volume. The joint venture is expected to be completed in 1H % 7, ,875 On 12th April, 2015, CR Gas entered into Cooperation Agreement with government owned Dalian Gas to establish a 40% joint venture, in Dalian. Dalian is a major city in Liaoning province with an annual GDP of RMB766 billion, population of 5.94 million and annual natural gas consumption of million m 3 currently. The gas sales volume has a lot of upside potential in view of the size of its population and GDP. The joint venture will cover concession area in high-tech industrial zone, Zhongshan, Xigang, Shahekou, Ganjingzi and the new airport business zone districts. The joint venture is expected to be set up in 2H2016. The Company considers the establishment of the above joint ventures would accelerate gas infrastructure development and modernise gas distribution and management in Qinhuangdao, Qingdao and Dalian to improve economic efficiency and to tap their vast potentials in the future. The joint ventures will enable the Group to further extend its coverage and footprint in the PRC. The Group has existing city gas operations in various cities in the North East Region of China. These joint ventures will create synergy with the Group s existing gas operations, thereby will broaden the Group s revenue base as well as enhance and sustain its earning capabilities. 7

12 Platts Top 250 Asia News- Chairman s Statement capital market performance From 2008 to 2015, the share price of the Company has increased by 6.76 times from HK$3.42 to HK$23.15 and its market capitalisation has increased by times from HK$3.083 billion to HK$ billion. From , the profit of the Group increased by times from HK$237 million to HK$2.84 billion, turnover increased by times from HK$2.99 billion to HK$31.10 billion and total assets increased by times from HK$3.71 billion to HK$59.90 billion. Based on Bloomberg s report, as at 31st December, 2015, the Company was covered by 25 analyst reports which is the highest number among all listed peers in Hong Kong. 標普 穆迪 惠譽 Standard & Poor s BBB+ Baa1 BBB+ BBB+Baa1BBB International rating agencies, Standard & Poor s, Moody s and Fitch, have during 2015 affirmed the Company s investment grade ratings of BBB+/Baa1/BBB+ respectively, affirming the healthy state of the Company s financial position as well as its quality income stream from its Pan-China city gas project portfolio. The yield on the Company s 10 year US$750 million bond has consistently been lower than those of comparable peers, indicating strong demand of the bond and confidence in the Company s future by credit investors. The Company continues to receive many prestigious international and domestic acknowledgements from respected publications and institutions in Platts named us as the Second Fastest Growing Energy Company in Asia in Top 250 Global Energy Company Rankings. Our ranking continued its climb and advanced significantly in 2015 to position 181 from position 218 in Asia Newsweek Magazine awarded the Company the Best Results Performance Company and the Green New Energy Enterprise. Platts Top 250 Asia Newsweek week 8 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

13 Chairman s Statement benchmarking to enhance efficiency The Group s growth during 2008 to 2014 have been mainly driven by acquisition. Going forward, the Group will focus more on improving the operational efficiency and performance of its existing city gas projects, as the number of available acquisition targets, especially bigger city gas projects, have been reducing over the years. This shift in emphasis to organic growth, coupled with the projected significant increase in upstream gas supply over the next few years, is expected to deliver majority of the gas sales volume growth over the foreseeable future. In this respect, the Group has continued to carry out the company-wide Lean Management Campaign started in 2012 with the aim of utilising minimum amount of resources to maximise value added product and service delivery to customers in timely manners. The Group also kicked off the company-wide Benchmarking Campaign in 2013 with the objective of learning and implementing the best practices in the downstream city gas industry. This is to enable the Group to measure up with the best and eventually outperform the peers. The Benchmarking practice, which is continuing relentlessly throughout the Group s member companies, has integrated seamlessly with the Lean Management measures, by comparing benchmarks, finding differences, learning from others. These Benchmarking measures will accelerate the materialisation of the Company s goal. Honesty & Integrity Culture In 2012, the Company launched the campaign of establishing the Integrity & Honesty Culture across the Company and requires every staff to sign the Honesty & Integrity Declaration (). The Group always regards Honesty & Integrity as its foundation of development, and has issued and implemented a series of measures in recent years, including Regulation on Honesty & Integrity ( ) and Rules for Staff Responsible for Honesty & Integrity Culture (). 9

14 Chairman s Statement CORPORATE GOVERNANCE The Company is committed to enhance its standard of corporate governance by bench marking with good corporate governance practices and has adopted a Corporate Governance Handbook based on the Corporate Governance Code (the Code ) issued by The Stock Exchange of Hong Kong Limited (the Stock Exchange ). The Corporate Governance Report is set out on pages 40 to 53 of this annual report. Risk Management The Group is constantly alert to the threats or uncertainties with negative consequences facing the industry and has been taking various measures to safeguard the Group s interest. The system of annual and regular safety audit has been established continuously on all operating member companies of the Group to ensure compliance with national and local safety regulations. 10 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

15 Chairman s Statement 5 51 Internal audit function covering both financial and operation audit has been enhanced with new structure and increase in staff number. The Group has set up 5 regional auditing centers and carried out 51 audits at the Group and regional levels covering areas such financial, operation and project construction. Various audit and risk management guidelines have been revised and issued. 8 The Group has also set up the Preliminary Investment Review Committee and carried out legal due diligence and reviews on investment proposals and major contracts. Eight investment rules covering investments in private enterprises, LNG gas stations, pre and post-investment evaluation process, have been revised, issued and implemented ,116,000 43,200,000366,120 To strengthen the institutionalisation of the legal and compliance system, various guidelines on legal and compliance matters have been revised and issued with follow-up trainings and education. ENVIRONMENT AND SOCIAL CONTRIBUTIONS The Group is supporting the ongoing green environmental policies of the PRC government by actively expanding our cleaner natural gas business. Based on the annualised gross amount of about 14.9 billion m 3 of natural gas distributed by the Group, it is estimated that annually the Group helps to replace approximately million tons of coal usage and reduce approximately 43.2 million tons of carbon dioxide emissions and 366,120 tons of pollutants. The Group also carried out charitable activities as token of measure to contribute to society. The Group s member companies participated in poverty alleviation, donation towards education, caring for underprivileged groups and volunteer service activities in several regions, proactively donated money and goods for various public welfare activities in 2015, thus building good corporate images for the Group. INCENTIVE award SCHEME The Company adopted an incentive award scheme (the Incentive Award Scheme ) on 1st December, 2008 and amended the scheme on 16th March, 2010, for the purpose of recognizing and motivating the contribution of employees and providing incentives to existing employees. Details of the Incentive Award Scheme are set out in the Directors Report. 11

16 Chairman s Statement 44,624 training AND REWARD FOR EMPLOYEES As at 31st December, 2015, the Group have approximately 44,624 employees. The Group values human resources and recognizes the importance of attracting, training and retaining quality staff for its continual success. In addition to the Gas Faculty in China Resources University, which designs courses and provides training programs to the Group s workforce, the Group also operates 5 regional training centres covering Eastern, Northern, Central, Southern and South-Western China. These centres are located in our regional centres of Wuxi, Jining, Zhengzhou, Fuzhou and Chengdu. Various types of management and technical trainings are conducted through the Group for different levels of staff to enhance their knowledge and skills. Improvements were also carried out on the employee recruitment, assessment, remuneration and staff retention policies to enhance the human resources management process with the objective of recruiting, promoting and retaining the best talents, from both internal and external sources. CR Gas s management team comprises utility professionals with significant expertise across financial, regulatory, commercial and engineering disciplines. We strive to provide and maintain a satisfying and rewarding working environment for employees and commit to their training and professional development. The Group remunerates its employees based on their performance, work experience and the prevailing market wage level. Further, bonuses are granted to employees and incentive awards are made to employees based on merit and performance. The Group believes this will assist to attract and retain quality staff and at the same time encourage the employees to give their best performances. 12 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

17 Chairman s Statement OUTLOOK The Group s key business units in Jiangsu, Sichuan and Henan Regional Centres have continued to register good operating performances. Financial performance of Tianjin Project has turned profitable in 2015 and profit contribution from Chongqing Project is expected to improve steadily going forward. Newly acquired Qinhuangdao Project has started to a contribute positively to the Group s gas volume. Acquisition of Qingdao and Dalian Projects will be completed in These new projects will contribute significant to the Group s gas volume and bottom line in the next few years. The Group has embarked on various operational enhancement measures to boost the quality of its organic growth, starting with Lean Management practice and Bench-marking measure in 2012 and 2013 respectively. The Group continues to focus intensely on these measures to improve operation efficiencies relentlessly in 2015 and beyond. The Group will ride on the continuing favourable industry fundamentals and its experienced management team with strong execution record to scale new heights via quality organic growth and external acquisitions. APPRECIATION On behalf of the Board, I would like to take this opportunity to express our most sincere appreciation to our business partners, customers and shareholders for their unfailing support as well as all the Group s employees for their hard work and dedication in carrying out their duties and in achieving the Group s business goal. WANG CHUANDONG Chairman Hong Kong, 30th March,

18 Report from the Chief Executive Officer The management team continuously enhances the operational efficiency and core competency of the Group to achieve sustainable organic growth. 8% % 10% operating RESULTS The Group achieved an increase in turnover of 8% to HK$31,096 million and recorded profit attributable to the Company s equity holders of HK$2,838 million for the year ended 31st December, 2015, an increase of 14% over corresponding year. The operating profit from city gas distribution business increased by 10% to HK$4,892 million and the cash generated from operations increased from HK$6,689 million in 2014 to HK$6,984 million in % 22% 78% 22% The revenue of city gas distribution operation is derived from recurring gas sales and one-time gas connection fee which respectively accounts for 78% and 22% of the 2015 revenue (2014: 78% and 22% respectively). 14 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

19 Report from the Chief Executive Officer % Gross gas sales volume increased 9% from billion m 3 to billion m 3. 2,07414% 2,361 The total connected residential customers increased 14% from million to million, despite the softening of the private residential property market in This was mainly because the number of public housing units increased significantly in China under the government s policy to cushion the impact of the soft private property sector. The increase in the retrofitting of old households with new gas connections also helped to mitigate against the slowdown in the private residential property market. 49% 8,900 LNG Tianjin Project (49% interest jointly-controlled enterprise) turned profitable during This represents a significant improvement compared to a loss of HK$89 million for The turnaround was mainly due to the reduction of management and interest expenses, as well as increase in heating and LNG procurement subsidies. Performance of Tianjin Project is expected to continue to improve in 2016 and beyond New Investments During 2015, the Company continued to make new acquisitions and invested or paid HK$1,650 million in 18 city gas projects (including Qingdao and Qinhuangdao Projects). Most of these projects are either wholly owned or majority owned by the Group. Another 9 projects totaling HK$166 million were invested at sub-business level. The above investments totalled HK$1,816 million. As at 31st December, 2015, CR Gas portfolio included 220 city gas projects and its footprint covered 22 Chinese provinces and included 3 direct administrative municipalities, 14 provincial capitals and 72 prefecture level cities In addition, as at 31st December, 2015, the Company has announced or the Board has approved another 25 proposed city gas distribution and related projects with proposed investments of HK$1,477 million. 15

20 Report from the Chief Executive Officer The Group has been active in seeking business opportunities to expand its core business of downstream city gas operation in the PRC over the recent years. Its existing city gas projects are strategically located in various provinces in the PRC. The Investments are part of the on-going expansion strategy of the Group with the aim of becoming the market leader in the downstream city gas industry in the foreseeable future. 17 The Investments will enable the Group to further extend its coverage and footprint in the PRC. The Group has existing city gas operations in these provinces and has 17 regional offices set up in various strategic locations in the PRC. The projects of the Investments will be efficiently integrated and managed by the relevant regional office depending on their geographical locations. As such, the Group considers that the Investments create synergy with the Group s existing gas operation, thereby will broaden the Group s revenue base as well as enhance and sustain its earning capabilities. The Group also conducts ongoing evaluation of past investments, which are essential for making decisions on future investments. 49% Gas Price Revisions In the effort to shift the cost burden away from the industrial sector, the NDRC announced in March 2014, the country would introduce three-tiered gas pricing for residential use. By the end of 2015, 49% of our affected residential volume in cities such as Wuxi, Zhengzhou, Nanjing, Shanghai, etc., have adopted step pricing system for residential customers. This step pricing mechanism has lead to expansion of residential dollar-margin in Among all peers, CR Gas has the most number of residential customers, thus benefit most from this measure and future upward revisions of residential gas price. 16 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

21 Report from the Chief Executive Officer On 28th February, 2015, the NDRC merged city gate prices of incremental and existing gas volumes by lowering the price ceiling of incremental volumes by RMB0.44/m 3 and raising the price ceiling for existing volumes by RMB0.04/m 3 with effect from April 1st The blended average nonresidential gas price dropped as a result % The non-residential city gate gas price ceiling was further reduced by a much more significant amount of RMB0.70/m 3 on 20th November, This translates to about 28% drop in average city gas prices. The above downward adjustments of blended city gate gas prices increased the pricing competitiveness of natural gas and, in turn, demand growth. The cuts, being the first after the gas price reform started in 2011 whereby gas prices have been steadily increasing since then, sent a significant message: the PRC government is serious and willing to push forward with the reform with both upward or downward price adjustments to reflect market prices. 10% 5.6% In the long run, the cheaper gas will greatly stimulate demand as abundant cheaper gas is going to be available globally and in China within the next 3 to 5 years and will thus enable the NDRC to meet its future goal of gas making 10% or more of the total Chinese energy sources, up from the current 5.6% level. Such an environment will be extremely positive for the entire downstream city gas industry. Going forward we expect that city gate price of gas will see more frequent adjustments, half yearly or even quarterly and eventually fully market driven once Shanghai Oil & Gas Exchange market matures and third party gas access is allowed on the main gas pipelines. 17

22 Report from the Chief Executive Officer BENCHMARKING TO ENHANCE OPERATIONAL EFFICIENCY & CORE COMPETENCY Benchmarking is the process of comparing one s business processes and performance metrics to the best practices of the industry. The Group has embarked on this best practice to benchmark across all business units. Benchmarking has started off internally with intra-group benchmarking and have extended to benchmarking against external best practices of the industry. Implementing Benchmarking measure is an indispensable choice for CR Gas to accomplish the fundamental transformation of its growth model from resources-driven growth to efficiency improvement, and is also one crucial approaches taken by CR Gas to achieve its strategic goal to become the leading world-class gas enterprise in China % 5% This combination of internal and external benchmarking helps each member company to identify the most important gaps between its current state and where it wants to be, create a road map for change and generate the rigorous cost and performance baseline necessary to effectively track progress on that road map over time in terms of cost reductions and performance improvements. All member companies were required to not only sign Benchmarking Responsibility Contracts containing 82 benchmarking criteria with head office, but also to implement those targets as their daily working standards. This ongoing campaign has led to many satisfying results last year. For example, the average period needed to install gas connection to commercial & industrial customers was further reduced from 42 days to 38 days. Also the average gas leakage rate has decreased further to 2.73%, lower than the industrial average of 5%. 18 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

23 Report from the Chief Executive Officer 17 Continuous EFFICIENCY improvement OF regional centres and design & construction centres The Group has 17 Regional Centres to decentralise the management of the day to day operation of the Group s city gas projects across China. Each Regional Centre is responsible for the day to day operation of a cluster of cities within their respective regions. This enhances the operation efficiencies and provides better services that respond faster to changing local demand and conditions. Members of the Group s management team concurrently serve as regional general managers. The arrangement minimises the increase in headcounts or resources, thereby achieving the goal of attaining maximum results with minimum resources. 51% 91.5% The Group s three Gas Pipeline Design and three Gas Pipeline Construction Centers in Nanjing, Chengdu and Zhengzhou were centralised and managed directly by the Head Office. The centralisation of the Group s design and construction activities will further enhance standardisation of pipeline construction and central procurements thereby resulting in further cost reductions. As of 2015, 51% of construction activities and 91.5% of design activities were conducted by the Group itself respectively. 19

24 Report from the Chief Executive Officer Business Process Stream-lining and Operation Enhancement The Group continues its systematic review of the business and management processes of its various city gas projects. This ongoing process is expected to continuously enhance the overall operational efficiency of city gas projects. IT 78% 7% The Group s supply chain management was further streamlined with rigorous tender system covering construction projects with the issue and implementation of new or revised guidelines covering various categories of projects and quality control measures. With the help of centralized procurement IT system, most of our purchase materials have been centralized, representing 78% of total material procurement expenditure up to the end of The procurement costs have decreased by 7% as a whole through centralized purchase, thereby reducing procurement costs significantly. Improvements were also carried out on the employee recruitment, assessment, remuneration and staff retention policies to enhance the human resources management process with the objective of recruiting, promoting and retaining the best talents, from both internal and external sources. CR Gas s management team comprises utility professionals with significant expertise and experiences across financial, regulatory, commercial and engineering disciplines. We strive to provide and maintain a satisfying and rewarding working environment for employees and commit to their training and professional development. With the objective of efficiency enhancement in view of the significant increase in operation size of the Group in recent years, information technology systems covering project management, top-up cards for gas stations, office administration, centralized cash management, financial reporting, human resources, centralized procurement and customer service are continuously being rolled out across various levels of the Group s operation ,300 On the continuous enhancement of customer service, 11 standards on Customer Service have been introduced to 115 member companies and Customer Information has been promoted to 27 member companies. In addition, we organized qualification certification training for 2,300 safety inspectors accumulatively to further protect customers safety and improve their safety awareness. To further explore customers demand and expectations, we collect and listen to customers opinions from various channels and dedicate our efforts to provide quality services and safe products to our customers. 20 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

25 Report from the Chief Executive Officer On the financial and tax management areas, the Group has successfully promoted value-oriented management system to each member company and thus effectively reduced costs and expenses. In particular, we further enhanced the centralization of cash management with the inclusion of more member companies in the system with significant increase of cash pool size. By doing so, the Group has greatly reduced the overall cost of borrowing. Furthermore, various taxation rationalization and reduction measures were taken to reduce tax exposure and speed of tax setoffs and refunds. SAFETY management ENHANCEMENT The Group has formulated a number of safety management policies and procedures as well as hiring qualified engineers and technical staff to manage and prevent any potential accidents in the Group s natural gas related facilities which may cause damage to the environment. In addition to our internally commissioned control, hazard prevention and emergency recovery procedures, we have fully complied with the relevant local and national environmental protection regulations and licensing requirement. 21

26 Report from the Chief Executive Officer 23, KPI 91.76% % To improve our safety standard, the Group implemented a range of company-wide safety and environment conscious campaigns involving 23,538 persons; closely monitored safety performance by conducting regular safety inspection of gas stations, branch pipelines, customer pipelines, gas meters and gas appliances; carried out safety related trainings and seminars in regional centers and hired more than 749 state certified safety technicians. In 2015, the Group made great achievements in many pipeline network KPI indices. For example, the pipeline leakage self-inspection rate has been enhanced to 91.76% and the number of network third party damage accidents per hundred kilometers has been reduced to 0.59, representing a reduction of 0.17% as compared to last year. The Group place emphasis on educating staff and users in respect of safety procedures. Accordingly, regular trainings and seminars are held for relevant staff. For end users, thorough explanations of safety procedures are given and regular seminars as well as distribution of brochures and booklets on safety are arranged. APPRECIATION I would like to express my deepest gratitude to our management team and staff members for their unfailing hard work and dedication. We would continue to work hand in hand to improve service to our customers, increase efficiency to enhance the values of the shareholders and employees. SHI SHANBO Executive Director & Chief Executive Officer Hong Kong, 30th March, CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

27 Financial & Operational Highlights Financial highlights For the year ended 31st December, Restated HK$ 000 HK$ 000 Increase/ (Decrease) Turnover 31,095,756 28,717,025 8% Gross profit 9,788,822 8,713,590 12% Profit from operations (before finance cost and share of JV & associates results) 4,891,555 4,433,622 10% Profit for the period 3,803,107 3,349,129 14% Profit attributable to the Company s equity holders 2,837,910 2,479,898 14% Cash from operations 6,983,749 6,689,089 4% Net cash from operating activities (after tax payments) 5,690,055 5,476,262 4% (1) Basic EPS (1) (HK$) % Interim dividend paid per share (HK cents) % Final dividend proposed per share (HK cents) % Total dividend per share for the year (HK cents) % (1) Note: (1) Basic earnings per share is calculated based on weighted average number of issued shares, excluding restricted award shares held by trustee. 23

28 20 43% Financial & Operational Highlights For the year ended 31st December, Restated HK$ 000 HK$ 000 Increase/ (Decrease) Total assets 59,896,272 57,751,698 4% Bank balance and cash 10,750,872 9,707,507 11% (1) Total bank and note borrowings (1) 14,899,191 14,929,154 0% Net borrowings 4,148,319 5,221,647 (21%) Equity attributable to the Company s equity holders 17,009,359 16,063,368 6% Non-controlling interests 5,477,647 5,064,551 8% Total equity 22,487,006 21,127,919 6% (1) Note: (1) Included therein were HK Dollar and US Dollar denominated loans and bond of some equivalent HK$14.3 billion. To minimise foreign exchange losses, it is planned to change these to RMB denominated loans or to settle them. The amounts planned for 2016 and 2017 are HK$4 billion and HK$4.5 billion respectively. Financial Indicators Restated Gross profit margin 31.5% 30.3% Net profit margin 9.1% 8.6% Current ratio 0.8x 0.9x (1) Net Debt to equity ratio (1) 24.4% 32.5% (2) Debt to capitalization ratio (2) 39.9% 41.4% (3) Debt to assets ratio (3) 24.9% 25.9% (4) Return on weighted average equity (4) 16.6% 15.4% (1) (2) (3) (4) 11.0% 10.0% Notes: (1) Net Debt/equity gearing ratio is the ratio of net borrowings to shareholders equity. (2) Debt/capitalization gearing ratio is the ratio of total bank and note borrowings to total bank borrowings and total equity. (3) Debt/asset gearing ratio is the ratio of total bank and note borrowings to total assets. (4) If merger reserve is excluded, return was 11.0% (2015), 10.0% (2014). 24 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015

29 Financial & Operational Highlights Operational Performance As at As at % Operational Performance 31st December, st December, 2014 Change/% Number of projects Gross sales volume (million m 3 ) 14,913 13, % Residential 3,863 3, % Commercial & Industrial 9,337 8, % Gas Station 1,713 1, % Connected Customers Residential 23,608,806 20,738,125 2,870,681 Industrial 9,541 7,909 1,632 Commercial 164, ,263 30,042 Number of Gas Station (CNG/LNG/L-CNG) (CNG/LNG/L-CNG) 317(217/67/33) 279(194/55/30) 38(23/12/3) Average sales volume of single Gas Station (million m 3 /per year) (6.9%) Average Gas Tariff/Cost/Gross Margin (RMB per m 3 ) 2.94/2.23/ /2.24/ /(0.01)/0.04 Residential 2.21/1.96/ /1.99/ /(0.03)/0.08 Commercial & Industrial 3.06/2.25/ /2.27/ /(0.02)/0.09 Gas station 3.64/2.42/ /2.55/ /(0.13)/0.15 Average Gas Gross Profit Margin 23.7% 22.2% 1.5%pt Residential 11.2% 7.8% 3.4%pt Commercial & Industrial 26.4% 24.0% 2.4%pt (CNG/LNG) Gas station (CNG/LNG) 33.7% (36.4%/25.8%) 29.5% (30.1%/19.6%) 4.2%pt Average Residential Connection Fee (RMB) 2,990 3,160 (170) Installed designed capacity for C&I customers (m 3 per day) 62,869,040 47,431,293 15,437,747 % /Utilization rate (%) 40.7% 49.5% (8.8%)pt Penetration Rate of Residential Household 44.4% 41.5% 2.9%pt Total Length of Pipeline (km) 116,241 98,512 17,729 25

30 Management Discussion and Analysis FINANCIAL RESULTS The Group s results for 2015 were mainly driven organic growth. The Group s turnover for the year amounted to HK$31,096 million (2014: HK$28,717 million) The city gas distribution business contributed an after tax but before non-controlling interest profit of HK$3,803 million (2014: HK$3,349 million) and profit attributable to shareholders of the Company of HK$2,838 million (2014: HK$2,480 million) % % % Turnover The turnover of the city gas distribution operation for the year ended 31st December, 2015 amounted to HK$31,096 million, an increase of 8% over that of The increase was mainly due to the increase in gas sales volume by 9% from billion m 3 to billion m 3 and the increase in connection fee income by 10% from HK$6,236 million to HK$6,869 million. The increase in gas sales and connection fee income were in turn driven by the following factors: (1) 4,743 33% 6,287 (1) 33% increase in the daily installed capacity for commercial & industrial ( C&I ) customers from million m 3 to million m 3. (2) 2,07414% 2,361 (2) 14% increase in the number of connected households from million to million. 31.5%30.3% %23.7% 59.8%58.9% 3,160 2,990 Gross Margin The city gas distribution operation registered an overall gross profit margin of 31.5% for 2015, which was 1.2 points higher than the 30.3% for This was because the gross margin of gas sales increased slightly from 22.2% to 23.7% despite gross margin of connection fee decreased from 59.8% to 58.9% due to changes in city mix resulting in a reduction in average connection fee per household from RMB3,160 in 2014 to RMB2,990 in The higher overall gas sales margin was mainly due to higher margin achieved in sales to commercial and industrial customers arising from dollar margin expansion during gas price reductions and the increase in residential dollar margin due to tiered pricing implement through residential customers. 26 CHINA RESOURCES GAS GROUP LIMITED Annual Report 2015